Business

Will Twitter Ever Be Mainstream?

Twitter's IPO paperwork revealed plenty of ways that its business differs from Facebook, but perhaps the most basic is its reach: There are significantly more people in the United States who don't use Twitter than those who do. For Facebook, the opposite is true.

Twitter had just 49 million monthly active users in the U.S. for the three months ending in June, a number that may be slightly higher now, but probably not too much so, considering it only increased by about one million from the previous quarter. To put that in context, there are an estimated 244 million Internet users in the U.S., meaning roughly a fifth of the country actually uses Twitter at least once a month.

Facebook, on other hand, had 198 million monthly active users in the U.S. and Canada during the same quarter and recently revealed that it had 128 million daily active users in the U.S. specifically as of August. In other words, more than half of U.S. internet users now visit Facebook every single day and presumably even more than that access it on a monthly basis.

There is a similar gap between the reach of Facebook and Twitter globally. Twitter had 218 million monthly active users worldwide in the second quarter; Facebook had more than 1.15 billion. The bottom line: Facebook is mainstream. Twitter, still, is not.

As it so happens, Twitter's S-1 form is most clear and concise explanation for why the company is far from having a majority of Internet users in the U.S. and other countries.

People who are not our users may not understand the value of our products and services and new users may initially find our product confusing. There may be a perception that our products and services are only useful to users who tweet, or to influential users with large audiences. Convincing potential new users of the value of our products and services is critical to increasing our user base and to the success of our business.

Translation: Twitter may be seen as unintuitive or irrelevant, effectively causing potential users to give up on the service quickly or never try it at all.

Yes, the social network has attracted millions of hyperactive users — a point Twitter tried to drive home in the S-1 by emphasizing double-digit percentage point increases in "timeline views" per monthly active user — but analysts are split on whether it really has the same mass market potential as a service like Facebook, and how much it matters for Twitter's revenue potential.

"Most people don't tweet, which shouldn't be a shocker. Most people will probably never tweet," Brian Wieser, a senior analyst with Pivotal Research Group. "That doesn't mean that Twitter isn't an important media vehicle," he adds, comparing it to outlets like The Wall Street Journal, which reach millions of consumers but don't saturate the market. "It's not necessary to be ubiquitous."

Even if Twitter never achieves comparable reach to Facebook, Wieser argues it will be able to attract ad dollars from big and small businesses who can use Twitter's tools to better target their customers who do use the social network. Twitter itself points out that if user growth rates slow, it will put more pressure on the company to boost "advertising revenue per timeline view," presumably by showing more and new promoted products and commanding higher ad rates for them. Yet, as Wieser points out, Twitter would also have to fight that much harder to seal more lucrative ad deals with brands who might prefer saving their bigger bets for networks with "broad reach."

Michael Pachter, an analyst with Wedbush Securities, also argues that Twitter's status as a niche service carries over into the world of advertising personnel.

"There isn't an executive making an ad spend decision alive who doesn't know what Facebook is. They are either on it themselves or their spouse or their children are on it," Pachter says. "I would say there are a ton of advertising decision makers who have no fricking clue what Twitter is."

However, Pachter is optimistic that this will change as Twitter continues to educate advertisers and investors about its service and continues to grow its users base.

"I think they could grow to Facebook-type size eventually. It depends on how successful they are at convincing people to use it," Pachter says. "It's the chicken and the egg: if they get more people on, then more people will join."

For its part, Twitter noted in the S-1 that it intends to "drive growth" by educating people on the "usefulness" of its service and rolling out new features and products to appeal to a broader base of users, but there's no guarantee it works. As the company wrote in its filing, "The market for our products and services is relatively new and may not develop as expected, if at all."

Mashable
is a global, multi-platform media and entertainment company. Powered by its own proprietary technology, Mashable is the go-to source for tech, digital culture and entertainment content for its dedicated and influential audience around the globe.